Macro Outlook Next Week: CPI Data May Reinforce the Fed's Rate Cut Cycle

Although the U.S. Federal Reserve (Fed) implemented a rate cut as expected and signaled a more dovish stance than market predictions this week, the actual challenges in the artificial intelligence (AI) sector are causing a clear divergence in the movements of the US stock and bond markets. Notably, long-term US Treasury bond yields rose across the board during the “Fed rate cut” week. The 10-year US Treasury yield increased by approximately 5 basis points, indicating lingering skepticism in the bond market regarding the pace of monetary policy easing in the near future. Major Macroeconomic Events Next Week Next week, a series of important economic events and data will attract the attention of global investors: Monday, 22:30: Fed Governor Mester speaks. Monday, 23:30: New York Fed President John Williams (permanent FOMC member) shares economic outlook. Thursday, 01:30: Atlanta Fed President Raphael Bostic (FOMC member 2027) discusses economic outlook. Thursday, 21:30: US November CPI data released, including: Core CPI (seasonally adjusted), Monthly core CPI (seasonally adjusted). Thursday, 21:30: US initial jobless claims for the week ending December 13. Friday, 23:00: University of Michigan Consumer Sentiment Index (December final), US consumer one-year inflation expectations (final). CPI – A Key Factor Influencing the USD Direction Among the above data, the US CPI report is considered a pivotal factor for the short-term trend of the US dollar. Currently, US inflation remains around 3%, higher than the Fed’s 2% target. If CPI is lower than expected: This would reinforce the rationale behind the Fed’s rate cut cycle, exerting additional downward pressure on the USD and supporting risk assets. If CPI is higher than expected: The USD’s weakening trend could be reversed, along with increased concerns that the Fed will need to be more cautious in its upcoming policy easing decisions. Overall, next week’s inflation data will not only impact the currency markets but also play a crucial role in shaping the Fed’s policy expectations, thereby influencing stocks, bonds, and global asset markets.